US campuses chase foreign students

24 March 2010

Professor Geoffrey Garrett

Dean, The Wharton School of the University of Pennsylvania

The Australian

by Guy Healy

Scores of cash-strapped US state universities are preparing to open their doors to foreign undergraduates, posing a serious challenge for Australian universities, US Studies Centre chief executive Geoffrey Garrett has warned.

In the wake of the global financial crisis, US state universities were turning to foreign undergraduates for the first time to compensate for funding cuts, Professor Garrett told the HES.

"The obvious implication is the market for foreign students will become more competitive because you will have a lot of large and high-prestige universities competing for the students," he said.

"University of California, Berkeley, is an extremely powerful global brand and Berkeley now wants to attract a lot of foreign undergraduates."

As well, the cheaper US dollar, plenty of student accommodation and faster visa approval times should give the US an edge.

Professor Garrett said American state universities had been told "they can fish in the global market and charge the global price. That's a very important revenue stream for cash-strapped universities."

The US universities were adopting a strategy that Australian universities had pursued for more than a decade.

"That's a big change," Professor Garrett said. "The University of California has 10 campuses, including Berkeley, Los Angeles and San Diego; top-ranked universities. Until the financial crisis, they weren't in the market. After the crisis they will be."

US universities - unlike their commuter-based Australian counterparts - also could offer foreign undergraduates established residential infrastructure, he said.

"If you combine their brand power plus their big residential services, that'll make them very competitive very quickly in the foreign undergraduate student market."

The US is the world's dominant player, capturing 20 per cent of the three million strong global student market in 2008, and shares source countries India, China and South Korea with Australian universities.

The challenge to Australian universities, which rely on foreign undergraduates to fund one-quarter of their teaching, was made more acute by the attractiveness of the weak US dollar, Professor Garrett said.

"It will create problems for the English-speaking countries that have been more successful in Asia: Australia, England, Canada and New Zealand."

None of Australia's Group of Eight overseas offices reported any direct effect from the US push yet.

However, the University of Melbourne's China contacts said the US had reversed its student visa regime to the point that it was "much faster" to get a US student visa than an Australian one.

University of NSW international director Alek Voninski said most US student visa applications from China, Australia's No 1 source country, were being approved, up from 10 per cent just five years ago.

Mr Voninski said projected growth in overseas student numbers during the long term was likely to cushion Australia from potential losses to the US. However, marketing Australia as an affordable destination compared with the US was likely to be a "real challenge", as local tuition fees rose, housing affordability issues continued and if the Aussie dollar reached parity with the greenback.

He pointed out Go8 universities required a foundation year for many international students, while US universities accepted them directly into year one.

Australian universities could not compete with US universities on scholarships for research students, he said.

"If Australia begins to lose both significant amounts of pre-university and research international students, it will be only the short-term postgraduate coursework that remains, leaving Australian universities more exposed," Mr Voninski said.

Professor Geoffrey Garrett

Dean, The Wharton School of the University of Pennsylvania

Geoffrey Garrett was the founding CEO of the US Studies Centre. Garrett is Dean, Reliance Professor of Management and Private Enterprise, and Professor of Management at the Wharton School of the University of Pennsylvania. Previously, he has been the Dean of the Business Schools at both the University of Sydney and the University of New South Wales.